Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Ms S Monk[39] and Professor C M E Whitehead[40] (AFH 57)


  This memorandum addresses the affordability problems facing many groups of people who are not eligible for assistance with their housing costs yet cannot afford market housing. This is sometimes termed the "key worker" problem because it is seen to affect employees in essential public services such as the police, the health service and education, yet the problem is much wider than that. The evidence, which comes from secondary data on house prices and incomes as well as surveys of employers and employees in selected parts of the South East and London, illustrates the growing scale of the problem and how it is affecting recruitment and retention of staff in high pressured areas. The memorandum explores a range of potential solutions, some of which are already being implemented and others which are worthy of further consideration.


  There is a growing gap between social sector and private sector rents—implying large numbers of households unable to afford adequate accommodation.

  While average incomes are high in London and the South East, the distribution of income is relatively uneven, suggesting that a larger proportion of households may need help with their housing costs.

  Many of the households in need of assistance are in work but at the lower end of the income scale. Therefore the amount of help required may be less—and for a shorter period—than for traditional social sector tenants

  Most people aspire to owner occupation and do not want traditional council housing although they are prepared to live in rented housing in the early stages of their careers.

  Problems of affordability in the housing market are affecting the labour market, creating difficulties for employers in recruiting and retaining staff.

  The problem is additional to the need for traditional social housing for priority needs which are also growing in pressured areas.

  The main ways to achieve more affordable housing are:

    —  to build affordable housing on the back of market housing using s106;

    —  to target available housing more closely on particular groups;

    —  to help more households in these groups by increasing total subsidy and by allocating housing in ways that provide shorter term and lower levels of assistance appropriate to individual circumstances;

    —  to increase the amount of subsidy available from employers—either to the household or via supply;

    —  to find additional funding eg from non-residential developments

    —  to limit losses of existing affordable housing;

    —  to change allocation priorities to concentrate more on key workers; and

    —  to improve access to employment from those living in lower priced areas.


  One of the solutions put forward relates to what is termed the Intermediate Market, between subsidised social rented housing and the unsubsidised owner occupied and private rented sector. Households who are not eligible for social housing can be assisted to enter owner occupation through shared ownership and shared equity schemes. These can be operated by housing associations or by developers directly. There are already examples of developers selling discounted market housing without public subsidy, whereby the purchaser buys 75 per cent of the equity and the rest is retained by the developer as an asset accruing in value over time.

  Although research shows that most people aspire to owner occupation, there remains a clear role for renting, particularly for younger households at the beginning of their careers who often expect to move around. There is a case for increased provision of below market rented housing, again without public subsidy, provided by housing associations or other non-profit organisations. Again there are some examples of this, notably in respect of student accommodation, but this could be extended in high priced areas. There are also some examples of partnerships between housing associations and developers to produce sub market housing either for rent or part ownership.

  In addition, employers who are facing recruitment and retention problems associated with high housing costs and who also own development land could take steps to ensure that intermediate housing is built on their land. This includes public sector bodies such as NHS Trusts, although unless they develop the land themselves Treasury rules require highest value—this should be changed to enable intermediate housing to be eligible. It also includes private sector bodies who, while motivated by the need to make profits, could nevertheless take a longer sighted view.


Increase the supply of housing that is affordable

  Widen the definition/acceptance of affordable housing (to meet this second tier of housing) so that it includes:

    —  subsidised rented or shared ownership housing provided through RSLs and local authorities;

    —  low cost market housing for sale provided through the planning system; and

    —  lower priced "ordinary" market housing for rent provided without subsidy.

  Use the existing stock more efficiently:

    —  target vacant units and unfit property;

    —  tackle difficult to let property;

    —  "living over the shop" initiatives; and

    —  private sector leasing.

  Increase densities and encourage a better mix of house types on new market developments according to the context (urban/suburban/rural). Building near transport nodes—as well as being sustainable—can mean that car parking needs are reduced, freeing up more space for houses. Higher densities and a better mix of house types can help meet affordability problems for those key workers who are potentially able to access market housing without subsidy.

  Get the best out of the planning system:

    —  prioritise affordable housing in section 106 agreements;

    —  examine the potential for securing affordable housing in non-residential section 106 agreements where there are housing implications; and

    —  adopt a more streamlined approach as delays can be pivotal for both developers and partner RSLs.

  Section 106 for affordable housing in non-residential developments—because the housing that is required is employment-related.

  Affordable housing as a use class—which would reduce the cost of land for affordable housing.

  Use land owned by employers—explore ways to achieve more affordable housing on land owned by other employers as well as on publicly owned land—not just the Health Trusts and Health Authorities but also railway land, defence and other brownfield sites, including employer allocations in appropriate schemes.

  Create a local Housing Land Trust—to provide access to funding or pooling public sector land. This could involve the transfer of land through the use of s106 (commuted payments), land already in public ownership of one kind or another, or other sources. The aim would be to assemble land for affordable housing provision. There could then be "swaps" to ensure that affordable housing was built in sustainable locations, close to existing (or future) transport nodes, particularly public transport.

  Compulsory purchase at existing use value could be useful in certain circumstances, although it is recognised that much of London's green belt is already owned or has options from house builders.

Increase the ability to pay of specific groups

  Increase the flexibility of salary structures, particularly in the public sector—for example, by enabling appointments higher up the grade and abandoning age-related scales. Weighting, particularly with the proximity of London and its large weighting, is also an issue.

  Provide housing related relocation packages—these could range from paying removal costs through various forms of assistance with rents, loans towards deposits, loans towards mortgages, mortgage subsidies, to direct housing provision.

  Increase access to housing in the second tier of the housing market by widening the range of equity sharing initiatives which fill an important role between subsidised renting and market housing:

    —  traditional shared ownership;

    —  fixed equity shared ownership;

    —  lobby to retain DIYSO;

    —  employers' participation in direct provision; and

    —  participation by other funders—equity mortgages.

  Encourage the use of pension schemes for house purchase.

  Leasing for "market" renting by RSLs and other non-profit bodies.


  The current subsidy system includes demand side targeting, through Housing Benefit, and supply side targeting, through the provision of social rented housing by local authorities and RSLs. Policies include:

    —  "starter homes" initiatives such as Homebuy, introduced in April 1999, which allows people to buy a home in the private market with an interest free equity loan from a RSL for 25 per cent of the value of the property. The loan is repayable at 25 per cent of the current market value when the home is sold.

  These policies need to be further developed and extended which will require additional funding in order to address problems in highly pressured areas.

39   Ms Sarah Monk is Deputy Director of the Cambridge Centre for Housing and Planning Research, Department of Land Economy, University of Cambridge. Back

40   Professor Christine Whitehead is Professor of Housing, Department of Economics at the London School of Economics and also Director of the Cambridge Centre for Housing and Planning Research, Department of Land Economy, University of Cambridge. Back

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